Cairn India’s Merger With Vedanta May Fall Through

Billionaire Anil Agarwal’s plans to merge his two India-listed companies, Vedanta (earlier known as Sesa Sterlite) with oil producer Cairn India, might fall through with two large minority shareholders – Life Insurance Corporation of India (LIC) and Cairn UK Holdings deciding to vote against the move.

Corporate lawyers say with a majority of the minority shareholders saying no, the proposal will not pass the muster in shareholders’ meeting.

The promoters own 60 per cent stake, while LICowns 9.06 per cent stake in Cairn India. UK-based former promoter, Cairn Holdings, owns another 9.82 percent in the company.

“Of the 40 percent stake held by the minority shareholders, if the majority of them (21 percent of Cairn India’s equity) vote against the move, then the merger will fall through as per the existing law,” said R S Loona, a Mumbai-based corporate lawyer.

Reacting to the news, the shares of Cairn India shot up by 6.2 percent to close at Rs. 177 a share as investors cheered that the company will now be forced to offer increased dividend. Vedanta has the option to sweeten the deal for the minority shareholders and investors say they will wait for an offer from Vedanta to take a call on the next course of action.

An e-mail sent to Vedanta on Thursday morning did not elicit a response.

A CLSA analyst said Vedanta has a fairly stretched balance sheet and if the Cairn-Vedanta merger does not go, though, Vedanta will be forced to have Cairn India increase its dividend payout or even offer a special dividend to the shareholders.

Shareholders of Cairn India, like LIC, had earlier objected to a cheap loan worth $1.25 billion granted by the company to its parent, Vedanta. The promoters had used the cash to repay its $10 billion acquisition of Cairn India from Cairn in 2010.

A Kotak analyst said the failure to merge Cairn with Vedanta would make it difficult for the latter to access Cairn’s cash flows unless through tax-inefficient dividends and might warrant a holding company discount.

“The merger with Cairn India is critical to Vedanta (and Vedanta Resources) as it will substantially improve tight liquidity at the parent entities given the large debt and limited cash flows,” Kotak analysts Kawaljeet Saluja and Abhishek Poddar wrote in a note to their clients on Thursday.

Vedanta’s parent entity, Vedanta Resources, had net debt of $7.7 billion as of March on its balance sheet, while solely relying on the cash flows from Indian subsidiaries for debt servicing as its Zambian copper operations struggle with low profitability, said Kotak.

“Vedanta Resources has debt maturity of $2.4 billion due in FY16/17. Vedanta Resources had earlier loaned $2.7 billion to Twin Star Mauritius Holdings (TSMHL), a wholly-owned subsidiary of Vedanta (India), and debt pertains to the Cairn India acquisition. We believe the merger can facilitate loan repayment by TSMHL to Vedanta Resources, thereby, easing the high leverage at the parent entity,” it said.

(Source: http://www.businessstandard.com)

Warburg Pincus set to Invest Rs.1800Cr in Piramal Realty

In one of the biggest foreign direct investment (FDI) deals in the Indian real estate sector, global private equity firm Warburg Pincus will invest Rs 1,800 crore for a minority stake in Piramal Realty, the real estate development arm of Ajay Piramal Group.

In 1997, Warburg Pincus had invested in Piramal Healthcare.

The capital raised would be used to expand Piramal Realty’s portfolio and acquire marquee land parcels in and around Mumbai, the company said. Founded in 2011, Piramal Realty is based in Mumbai and has about 10 million sq.ft. under development in the prime areas of Byculla, Thane, Worli, the Bandra Kurla Complex and Mulund.

“Warburg Pincus was looking at an entity level investment in Indian real estate for the past 10-15 years. They could not find any… We did not need money earlier,” said Anand Piramal, executive director, Piramal group.

Ajay Piramal, chairman of the Piramal group, said, “Warburg Pincus’s investment and expertise will raise the level of real estate in India to international standards, as it has done in industries such as telecom, financial services, and pharmaceuticals.”

Niten Malhan, co-head (India), Warburg Pincus, stated, “Warburg Pincus invests in companies with high growth potential. It believes Piramal Realty is best positioned to achieve leadership in one of the world’s most attractive real estate markets.”

The realty sector is increasingly attracting global investors. On Monday, Oberoi Realty said it had raised Rs.324 Cr from Aranda Investments, an indirect subsidiary of Temasek Holdings. In May, Goldman Sachs and Nitesh Estates said they would invest $250 mn to buy assets. In July 2014, Piramal Enterprises and Dutch pension fund asset manager APG Asset Management had announced a strategic alliance to invest in mezzanine instruments (a hybrid of debt and equity financing). Piramal has a fund management company, Piramal Fund Management, which lends to real estate developers via debt and equity. Last year, the group’s flagship company, Piramal Enterprises, had entered into a strategic alliance with Canada Pension Plan Investment Board to set up a $500-million real estate finance company in the country.

Issued by infrastructure companies in India, with an investment target of $1 billion through the next three years.

(Source: http://www.businessstandard.com)

Introduction of E-biz Platform

14 Central Government services have been integrated with an eBiz portal.

Besides applying to these 14 services, an option is also made available to business community on eBiz portal to apply through Composite Application Form and make one-time payment for obtaining ‘Company Incorporation’ from Ministry of Corporate Affairs; PermanentAccount Number (PAN) & Tax Deduction Account Number (TAN) from Central Board of DirectTaxes; and ‘Employer Registration’ from Employees’ State Insurance Corporation and EmployeesProvident Fund Organisation.

In addition to above 14 services, 12 Central Government services have been identified for integration with an eBiz portal. The integration activities have commenced and these services are at various stages of integration.